As the importance of a college degree climbs and federal and state grant funding remains inadequate, millions of students in the U.S. continue to take out student loans each year to help pay for their rising education costs. In October 2011, the total amount of outstanding student loan debt in the U.S. exceeded $1 trillion (Chopra, 2012), resulting in Americans owing more on student loans than they do on credit cards. This translates to 37 million U.S. borrowers and counting. Although a college education typically provides long-term financial benefits, in the short term, the student loans used to finance the degree may burden the borrower.
Considering the potential costs and benefits of a college degree, are there certain undergraduate majors that are more likely to lead to occupations that yield sufficient income to repay student loans? With a focus on Texas where data allow, the following tables and charts highlight the relationships between undergraduate major, student debt level, and postgraduate earnings.
One million dollars is the oft-cited figure representing the difference in lifetime earnings between an individual with a bachelor’s degree and one with a high school diploma. However, as the chart above shows, incomes also vary widely within the same level of education. For example, 50 percent of bachelor’s-level workers in Texas make between $36,800 to $84,000 per year, indicating that 25 percent make less than $36,800 and 25 percent make more than $84,000. Consequently, many workers with associate degrees are making more than those with bachelor’s degrees, while other bachelor’s graduates are making more than some master’s degree holders.
In general, higher education leads to higher earnings — but are these financial payoffs consistent across all undergraduate majors? To what extent do the out-of-pocket costs — that is, the educational costs remaining after accounting for grants and scholarships — required to earn these degrees vary by major? Personal or family savings, work, and/or student loans must cover these expenses. Because incomes vary significantly even within educational levels, student loan repayment may challenge some borrowers more than others. Borrowers are more likely to encounter these burdens in the years immediately following their graduation or departure from school.
National Center for Education Statistics (NCES) data suggest that the benefits of an undergraduate degree are largely dependent on the major that a student chooses. As the table to the left demonstrates, beginning bachelor’s-level workers with engineering degrees make 2.5 times more per month than their humanities counterparts — $3,250 compared to $1,300. The science, technology, engineering, and mathematics (STEM) fields appear to outperform the humanities, social science, and education fields in terms of short-term earning potential. Conversely, monthly student loan payments appear to be similar across undergraduate major categories, ranging only from $227 to $265 on average. In terms of debt-to-income ratios, net monthly incomes seem to drive the results, with lower-income graduates more likely to encounter repayment hardships than those with higher incomes.